Destabilizing Balanced-Budget Consumption Taxes in Multi-Sector Economies
AbstractWe examine the impact of balanced-budget consumption taxes on the existence of expectations-driven business cycles in two-sector economies with infinitely-lived households. We prove that, whatever the relative capital intensity difference across sectors, aggregate instability can occur if the consumption tax rate is not too low. Moreover, we show through a numerical exercise based on empirically plausible tax rates that endogenous business-cycle fluctuations may be a source of instability for all OECD countries, including the US.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number halshs-00796685.
Date of creation: Sep 2012
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00796685
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
aggregate instability; indeterminacy; expectations-driven fluctuations; consumption taxes; balanced-budget rule; infinite-horizon two-sector model;
Other versions of this item:
- Kazuo Nishimura & Carine Nourry & Thomas Seegmuller & Alain Venditti, 2013. "Destabilizing balanced-budget consumption taxes in multi-sector economies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(1), pages 113-130, 03.
- Kazuo Nishimura & Carine Nourry & Thomas Seegmuller & Alain Venditti, 2013. "Destabilizing Balanced-Budget Consumption Taxes in Multi-Sector Economies," AMSE Working Papers 1312, Aix-Marseille School of Economics, Marseille, France, revised Sep 2012.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nishimura, Kazuo & Venditti, Alain, 2010.
"Indeterminacy and expectation-driven fluctuations with non-separable preferences,"
Mathematical Social Sciences,
Elsevier, vol. 60(1), pages 46-56, July.
- Kazuo Nishimura & Alain Venditti, 2010. "Indeterminacy and expectation-driven uctuations with non-separable preferences," KIER Working Papers 702, Kyoto University, Institute of Economic Research.
- Stephanie Schmitt-Grohe & Martin Uribe, 1995.
"Balanced-budget rules, distortionary taxes, and aggregate instability,"
Finance and Economics Discussion Series
95-44, Board of Governors of the Federal Reserve System (U.S.).
- Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
- Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 825-853, August.
- Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
- Philip R. Lane, 2002.
"The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD,"
Trinity Economics Papers
20022, Trinity College Dublin, Department of Economics.
- Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
- Narayana R. Kocherlakota, 1995.
"The equity premium: it's still a puzzle,"
Discussion Paper / Institute for Empirical Macroeconomics
102, Federal Reserve Bank of Minneapolis.
- Jonathan Gruber, 2006. "A Tax-Based Estimate of the Elasticity of Intertemporal Substitution," NBER Working Papers 11945, National Bureau of Economic Research, Inc.
- Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," NBER Working Papers 8896, National Bureau of Economic Research, Inc.
- Chryssi Giannitsarou, 2004.
"Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes,"
Econometric Society 2004 North American Summer Meetings
173, Econometric Society.
- Chryssi Giannitsarou, 2007. "Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes," Economic Journal, Royal Economic Society, vol. 117(523), pages 1423-1435, October.
- Chryssi Giannitsarou, 2004. "Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes," Econometric Society 2004 North American Winter Meetings 498, Econometric Society.
- Giannitsarou, Chryssi, 2006. "Balanced Budget Rules and Aggregate Instability: The Role of Consumption Taxes," CEPR Discussion Papers 5531, C.E.P.R. Discussion Papers.
- Benhabib, J. & Farmer, R.E.A, 1991.
"Indeterminacy and Increasing Returns,"
165, Cambridge - Risk, Information & Quantity Signals.
- Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
- Nourry, Carine & Seegmuller, Thomas & Venditti, Alain, 2013.
"Aggregate instability under balanced-budget consumption taxes: A re-examination,"
Journal of Economic Theory,
Elsevier, vol. 148(5), pages 1977-2006.
- Carine Nourry & Thomas Seegmuller & Alain Venditti, 2011. "Aggregate instability under balanced-budget consumption taxes: a re-examination," Working Papers halshs-00633609, HAL.
- Eric W. Bond & Kazumichi Iwasa & Kazuo Nishimura, 2012.
"The dynamic Heckscher–Ohlin model: A diagrammatic analysis,"
International Journal of Economic Theory,
The International Society for Economic Theory, vol. 8(2), pages 197-211, 06.
- Eric BOND & IWASA Kazumichi & NISHIMURA Kazuo, 2012. "The Dynamic Heckscher-Ohlin Model: A diagrammatic analysis," Discussion papers 12008, Research Institute of Economy, Trade and Industry (RIETI).
- Baxter, Marianne, 1996. "Are Consumer Durables Important for Business Cycles?," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 147-55, February.
- Benhabib, Jess & Nishimura, Kazuo, 1998. "Indeterminacy and Sunspots with Constant Returns," Journal of Economic Theory, Elsevier, vol. 81(1), pages 58-96, July.
- Casey B. Mulligan, 2002. "Capital, Interest, and Aggregate Intertemporal Substitution," NBER Working Papers 9373, National Bureau of Economic Research, Inc.
- Aurélien W. Saïdi, 2011. "Balanced‐budget rule, distortionary taxes and aggregate stability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(3), pages 293-300, 09.
- Takahashi, Harutaka & Mashiyama, Koichi & Sakagami, Tomoya, 2012. "Does The Capital Intensity Matter? Evidence From The Postwar Japanese Economy And Other Oecd Countries," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S1), pages 103-116, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.